During the past years, three major companies have been at the top of their game. Amazon, Disney and Netflix, all giants of their respective sectors, have grown and dominated throughout the years. Two of the listed companies thrived during the coronavirus pandemic, as Disney struggled with the closing of its theme parks and delayed film productions, despite launching Disney+. However, lockdowns have boosted Amazon’s sales as well as Netflix subscribers. But what does this mean for the stock market value and investors? Walt Disney (NYSE:DIS), Amazon (NASDAQ:AMZN) and Netflix (NASDAQ: NFLX) have been providing their investors with a solid return over the years. Is one of these giants a stronger bet for investors – is there a tendency for any of them to dominate? How have they developed over the years to achieve the status that they now own? Is it possible for any of these giants to lose their status as one of the best?
The Walt Disney Company came a long way since 2016, after the introduction of Netflix to the market. Due to concerns over slowing economic growth in China, the Company’s share prices dropped to $86.25 in early 2016, having started the year at $103. For the following years, its shares were going up and down, ranging between around $95 and $120. However, once decided to rival competition, announcing the plans of its streaming service Disney+, shares soared 9% to new all-time highs in April 2019, going on to reach $153.41 in November 2019, when the service launched.
Disney’s cruise, theme parks and film studio were all shut down as a result of the coronavirus pandemic in 2020. Share value dropped to $79.07, with the business slowed own. However, some costs were offset by the streaming service, which was boosted by the social distance measures, as people were advised to stay home.
To date, Disney+ has over 94.9 million subscribers, exceeding the initial subscriber target of 60 million to 90 million by 2024. Analysts calculate that $1,000 worth of Disney stock bought in 2016 would have generated around $2,186, in returns. Moreover, stocks are expected to increase by 2.9%, to reaching $192 this year.*
Over the past 15 years, Amazon stock delivered an average annual return of around 28%, highlighting the size of the company. Jeff Bezos, founder and CEO, has seen Amazon grow, stretching its categories to healthcare, groceries, devices, apparel, and lending/payments. It has seen annual revenues of over $230 billion and continued to prevail during the COVID-19 pandemic. The online retailer was deemed as a winner during the outbreak, which would “increase the number of customers on the platform, expand the list of products purchased by existing customers, accelerate the shift to eCommerce at large and enhance the company’s brand.”* Analysts calculate that a $1,000 investment in Amazon stock during the Covid-19 pandemic would deliver a 78% increase, at $7,800. The change from store to online shopping was an expected one, due to the imposed lockdowns and closure of the shops. Moreover, the outbreak helped it acquire several new customers, along with its loyal ones.
Amazon’s growth may actually be hindering the company’s value, as it can hardly manage its high demand. Nonetheless, the latest reports showed that earnings per share were $14.09 on revenue of $125.56 billion, with a profit of $7.23 per share on revenue of $119.7 billion being predicted by Refinitiv. However, the online retailer may now be hit when its current CEO, Bezos, steps down from his position later this year. Many traders fear that his departure will have a similar effect on the business like Microsoft and Starbucks’ respective CEO stepped down, which had caused a decline in business. Is it still early to decide on the future of their stocks, however, it is clear that Bezos’ term set the bar high. The successor, Andy Jassy was praised by Bezos as an “outstanding leader”.
Pioneers of the industry, Netflix applied pressure on Disney back in 2016, when it launched its streaming services worldwide. What happened next, was a technological phenomenon as the television industry was changed forever. Households have stopped their cable services, as Netflix CEO Reed Hastings Reed had pointed out, saying, “Ultimately, flexibility is more important than efficiency over the long term.” The business’ shares have risen by 53% in the past year, thriving during the lockdowns, in which the families were forced to stay indoors and find ways to entertain themselves.
Nasdaq reports that this year, Netflix will break even in terms of free cash flow, as opposed to previous years. Furthermore, CFO Spencer Neumann affirmed that “If we have excess cash, we’ll return it to shareholders through a share buyback program.” Previous quarters had shown free cash flow at $899 million – higher than the net income of $720 million. Despite leading to a significant increase in new members, Netflix’s long-term debt went up by over $500 million, from $15.3 billion. Amid everything, the streaming service’s stock still surged by more than 52% since the start of the 2021. Investors will be seeing their profits increase over the coming months, with the predicted earnings growth set to be at around 49.9%. However, some question the post-pandemic period, unless Netflix comes up with a method to maintain cash flow positive.
All three listed companies have thrived and taken on risks to be coined giants of the respective industry, and all have provided their investors with solid returns over the years. It is true that the ongoing pandemic has shifted the way the companies operate, and if normality is re-instilled, the companies will have to shift again. The giant firms had to adapt, and the adaptation process will have to be done once again. This is what traders will look at – the likelihood for the company to adapt to ensure solid earnings and keep its place at the top of the market. As the company risks by adapting, your risk in investment may lead to a larger reward.